Ron Paul: Tariffs Are Not the Answer

Tariffs Are Not the Answer
By Ron Paul

Ron Paul Institute

March 13, 2018

President Trumpís planned 25 percent tariff on steel imports and 10 percent tariff on aluminum imports may provide a temporary boost for those industries, but the tariffs will do tremendous long-term damage to the American and global economies. Tariffs raise the price of, and reduce demand for, imported goods. Tariffs ensure the preferences of politicians, instead of the preferences of consumers, determine how resources are allocated. This reduces economic efficiency and living standards.

Some justify these economic inefficiencies as being worth it to save American jobs. This ignores how tariffs increase costs of production for industries reliant on imported materials to produce their products. These increased costs lead to job losses in those industries. For example, President Trumpís proposed steel tariff could cost nearly 40,000 jobs in the steel-dependent auto manufacturing industry. Tariffs also cause job losses in industries reliant on exports. This is especially true if ó as is likely to be the case ó other countries respond to President Trumpís actions by increasing tariffs on US products.

Many of President Trumpís critics do not themselves support true free trade, which is the voluntary exchange of goods and services across borders. Instead, they support the managed (by government) trade of NAFTA and the World Trade Organization (WTO). NAFTA and the WTO promote world government and crony capitalism, not free markets. Any libertarian or free-market conservative who thinks the WTO promotes economic liberty should remember that the WTO once ordered Congress to raise taxes!

Foreign manufacturers may make convenient scapegoats for the problems facing US industry. However, the truth is that most of the problems plaguing American businesses stem from the US government. American businesses are burdened by thousands of federal regulations controlling every aspect of their operations. The tax system also burdens businesses. Until last yearís tax reform bill, the US had the highest corporate tax rates in the developed word. The tax reform bill lowered corporate taxes, but the US corporate tax rate is still higher than that of many other developed countries.

The United States not only spends more on ďdefenseĒ than the combined budgets of the next eight biggest spending countries, but also spends billions subsidizing the defense of developed counties like Germany, Japan, and South Korea. Bringing US troops home from these countries is an excellent place to start reducing spending on militarism.

￼The biggest cause of our economic problems is the Federal Reserve. Americaís experiment with fiat currency has enabled a system based on private and public debt. This makes trade imbalances inevitable as the US government needs foreign investors to purchase its debt. Foreign investors get the money to purchase the US governmentís debt by selling products to American consumers. A trade war could cause foreign investors to stop buying US debt instruments and could end the dollarís world reserves currency status. This would cause a major economic crisis ó but at least it would stop our shores from being flooded with ďcheap foreign goods.Ē

President Trumpís claim that trade wars can be easily won is as credible as the neoconservative claim that the Iraq War would be a cakewalk. A trade war would likely push the global economy into a recession or worse. Instead of imposing costs on American businesses and consumers and putting those whose livelihoods depend on imports out of s job, President Trump should address the real causes of our economic problems: the welfare-warfare state, the IRS, and the Federal Reserve.

(If the question was: how can you get dumbasses to cheer for a tax increase?)

"And now that the legislators and do-gooders have so futilely inflicted so many systems upon society, may they finally end where they should have begun: May they reject all systems, and try liberty; for liberty is an acknowledgment of faith in God and His works." - Bastiat

"It is difficult to free fools from the chains they revere." - Voltaire

It has been said that Trump is using tariffs as an (opening) trade negotiation strategy. He has quoted Elon Musk on the practices of trading "partners" like China. It would be interesting to hear what Ron would suggest to address these issues.

Tesla CEO Elon Musk tweeted at US president Donald Trump about the unfairness of the rules governing the car trade between China and the US. Musk lamented that an American car sold in China pays a 25% import duty compared to just 2.5% for Chinese cars entering the US (both of these figures were reported by the New York Times). He also complained US automakers couldn’t own a majority share of their factories in China, while five Chinese electric vehicle companies held full ownership of their factories in the US.

Twitter: B4Liberty@USAB4L"Foreign aid is taking money from the poor people of a rich country, and giving it to the rich people of a poor country." - Ron Paul
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The views and opinions expressed here are solely my own, and do not represent this forum or any other entities or persons.

It has been said that Trump is using tariffs as an (opening) trade negotiation strategy. He has quoted Elon Musk on the practices of trading "partners" like China. It would be interesting to hear what Ron would suggest to address these issues.

Well, Ron has addressed this in the past. First of all, the consumers in China pay that import duty - not Elon. Second of all, Ron Paul would just lower our tariffs regardless of what other countries may or may not do since it hurts us more than them anyway.

But I'm not buying the "Trump is just doing this as a negotiation ploy" argument. This guy has been pro-tariffs forever. Unless, he's been putting on that show for decades because he knew one day he'd be President and wanted to maintain his leverage - I'm just not that convinced there's 32817D chess going on here.

I am open to using our lowering of tariffs as a negotiation tool to encourage other countries to do the same, which is a little different than Ron Paul. He'd like a complete and immediate ramp down - I'm more willing to take a slower approach if we could use it to our advantage. But I would NEVER agree that we should RAISE our taxes as a way to get other countries to lower theirs - that's just ludicrous!

"And now that the legislators and do-gooders have so futilely inflicted so many systems upon society, may they finally end where they should have begun: May they reject all systems, and try liberty; for liberty is an acknowledgment of faith in God and His works." - Bastiat

"It is difficult to free fools from the chains they revere." - Voltaire